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The transatlantic battle between US and European financial markets has gained pace in the wake of the credit crisis, with Europe leading its older rival in foreign exchange and derivatives trading, but lagging in areas such as investment banking revenues.

A report by UK-based research firm International Financial Services London, has said that the share of six European financial markets has risen between 2007 and 2008, relative to the same markets in the US; these markets traditionally being the strongest in Europe and making the most gains. These include international bank lending, foreign exchange turnover and insurance premiums.

However, over the same period, in eight of the 17 financial markets that IFSL compared, the US market share rose, relative to Europe, in areas such as foreign equity trading, equity market turnover, domestic bonds and investment banking revenues, among others, the report said.

Investment banking revenue declined by 29% globally last year in comparison to the previous year, the report stated, with revenues in the US falling by 33%, from $38.6bn (€58bn) to $25.8bn. This is a larger decline than in Europe, where revenue fell by 27%, from $26.7bn to $19.5bn; however revenues in Europe are smaller.

In the securities markets, equity turnover in the US rose by a further 22% last year to $70.7 trillion, while falling by a quarter in Europe to $23.2 trillion, the report said. It also stated that on the US exchanges, trading in foreign equities rose much more rapidly in 2007 and 2008 and is up by 141%, compared with a 23% increase in Europe during that period.

In bonds, the total outstanding amount of all domestic bonds issued by the government, companies and other institutions in the US stood at $24.6 trillion at the end of last year, this is around 50% higher than the $16.1 trillion equivalent that was issued in Europe, according to the report.

However, it continued: “With bonds issued and traded internationally, the position is reversed, with European governments and organisations having issued international bonds totalling $14.5 trillion outstanding at the end of last year, nearly three times the $5.3 trillion of bonds outstanding of US issuers.”